Tuesday, December 06, 2005

The High Price of Congress

The manipulation of hysteria by politicians is nowhere more evident than in various tax campaigns, such as that of Fall 2005 regarding a "windfall profits tax" on oil companies. While we had a few months of very high prices for gasoline and high heating oil prices linger, it would be useful from time to time to look at actual costs for delivering energy products. Democrats and their friends among Republicans seem to think cheap energy prices are a natural right, regardless of what those cheap prices might cost, and, increasingly, whether or not they are even possible. Denying access to American energy resources, a standard political game by Democrats (and a few Republicans) for decades, is on the contrary a guarantee that prices will go up, whether in the form of prices at the pump, or in vastly increased expenditures to keep a military watch on overseas suppliers. And what exactly do they mean by "excess profits"? Marlo Lewis, a Senior Fellow at the Competitive Enterprise Institute, has extensive remarks on this at TechCentralStation, heavily documented I might add.

In the second quarter of 2005, U.S. oil companies earned about 7.7 cents for every dollar of sales. That is slightly below the average for all U.S. industries (7.9 cents), and considerably below the earnings rates of several other industries including banks (19.5 cents), pharmaceuticals (18.6 cents), software and services (17 cents), semiconductors (14.6 cents), diversified financials (11.3 cents), and household and personal products (10.9 cents)...Third quarter oil industry profits rose to 8.1 cents per dollar of sales -- still in line with the U.S. industry average...Exxon Mobil's third-quarter financial statement reports that the company's year-to-date tax payments total $72.9 billion. That is almost triple the $25.4 billion the company earned in year-to-date profits.[20] By what reasonable metric can it be argued that ExxonMobil's tax payments are deficient in relation to its profits, or that its profits are excessive in relation to its tax payments?...According to the Tax Foundation, between 1977 and 2004, the 29 largest U.S. energy firms collectively earned $630 billion in net income after adjusting for inflation. During that same period, those companies paid more than three times as much -- over $2.2 trillion -- in royalties, state and federal motor fuel taxes, and corporate income taxes....

Read the rest of Lewis's article. The expectations that Democrats and other politicians play upon year in and year out call to mind Ortega Y Gassett's warning about a certain kind of "mass intelligence," widespread convictions that resources and systems built with vast expenditures of capital, labor, and resources are somehow "natural," something that we're entitled to simply because we exist. In the real world, when a hurricane knocks out shipping terminals, refineries, offshore rigs, and trucking routes, oil companies had to spend two to three times as much money to deliver each gallon of fuel to the marketplace. Who's supposed to pay for that? Shall we bomb the Saudis if they don't cut the price of oil? The thing is, with markets, if you follow the logic and the documentation, something will come to you: how much things cost and how much you can expect to pay for them if you're willing to buy. Anything else is a socialist fantasy.